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  • FIRST POST
    • DrEskimo
    • By DrEskimo 4th Jan 18, 9:51 PM
    • 81Posts
    • 60Thanks
    DrEskimo
    Advice on S&S ISA Funds
    • #1
    • 4th Jan 18, 9:51 PM
    Advice on S&S ISA Funds 4th Jan 18 at 9:51 PM
    Hi All,

    I have recently become interested in investing my savings, and over the last couple of months have spent some time researching the various methods available.

    I have just finished some extensive renovation work on my property, so have poured all my money into that. Thankfully that is finished now (well got the garden left to do...), so now I am back to saving up the pennies.

    The first thing was to build a small emergency fund. Both me and my partner have in excess of 10k now, which we have saved since July, so think we have that sorted. Both are kept in cash ISA accounts at about 0.5% interest, but obviously earning interest is not the aim of these accounts. I think 10k is probably too much, so after paying for the garden work, we will probably look to have about 6k in total.

    So I have about 900 each month from my full time work that is not going towards bills and living costs. I plan to put this into a S&S ISA that I set up with H&L a couple of months back.
    I realise now that H&L is one of the most expensive platforms, so my first question is whether it is worth moving to another platform before I build any substantial funds in my account?

    I am planning on a largely passive investment strategy using funds, drip feeding money in each month. I have settled on the following break down, but would appreciate any advice:

    495 (55%) into the Vanguard Life-strategy 60% fund
    135 (15%) into the HSBC FTSE 250 fund
    135 (15%) into the Vanguard US Index fund
    135 (15%) into the iShares pacific (exc. Japan) fund

    My reasoning is that I wanted to use the Vanguard 60 to give me a decent foundation, seeing it as an 'all-round' fund for the bulk of my investment. I want to increase my exposure and risk by introducing a UK FTSE 250 tracker index for smaller companies, and then increase my exposure to the US and Asian markets through their tracked index funds. Using Trustnet and looking at the risk scores, I think given the proportion of my funds that are allocated to each, I end up with a total risk score of around 81, although my maths could be off...! If this is true, is my strategy above sensible, or would I just be better off investing in the Vanguard 80%, or indeed lower at Vanguard 70%? I guess that's a question for myself and the amount of risk I am willing to take.

    I am 30 and have no real plans for the money (not sure if this is unwise too...), but will be looking at keeping this invested for easily 10years+. If not longer. I think I am happy with a risk of about 80 at this stage.

    I also have additional funds coming in from a self-employed work (consultancy), so could look at increasing the amount I invest each month further. Although I am looking at additional contributions to my pension and overpaying the mortgage with that money. The additional income pushes me into the higher tax bracket, so additional pension contribution seems sensible, although I already contribute 8% and my employer contributes 16%, so is quite healthy I think?

    Thanks in advance for any help or guidance.
Page 1
    • Alexland
    • By Alexland 4th Jan 18, 10:30 PM
    • 2,574 Posts
    • 1,956 Thanks
    Alexland
    • #2
    • 4th Jan 18, 10:30 PM
    • #2
    • 4th Jan 18, 10:30 PM
    We don't give advice but pointers for your consideration.

    On the emergency fund look at using your personal savings allowance to hold the money in 5% FlexDirect and cycling through 5% regular saving accounts.

    I realise now that H&L is one of the most expensive platforms, so my first question is whether it is worth moving to another platform before I build any substantial funds in my account?
    Originally posted by DrEskimo
    Given your fund choice you will be paying at least 0.25% with an alternative platform so it's up to you if you can be bothered moving for a 0.20% saving. Also bear in mind HL might charge an exit fee too...

    If this is true, is my strategy above sensible, or would I just be better off investing in the Vanguard 80%, or indeed lower at Vanguard 70%? I guess that's a question for myself and the amount of risk I am willing to take.
    Originally posted by DrEskimo
    Your choice but there isn't a VLS70 but you could split your investment 50:50 between VLS60 and VLS80 and rebalance periodically. If you did this you could go to the lower cost Vanguard Investor platform at 0.15% for a total cost of 0.37%

    Also if you don't need access to 60 consider a S&S LISA for a 25% government bonus on up to 4k per year but the platform choice is limited so the fees slightly higher.

    Although I am looking at additional contributions to my pension and overpaying the mortgage with that money. The additional income pushes me into the higher tax bracket, so additional pension contribution seems sensible, although I already contribute 8% and my employer contributes 16%, so is quite healthy I think?
    Originally posted by DrEskimo
    Yes healthy but you could still contribute a lot more into your pension to avoid higher rate tax and child benefit clawback (if applicable). Have you seen how much money you need to accumulate and grow above inflation for a comfortable early retirement?? I tune my income to keep within basic rate tax. This year my pension contribution is worth about 5x the value of my car.

    Overpaying the mortgage might be worthwhile if it improves your LTV and resulting interest rate but once you own about 40% of the property the money is usually better invested for a greater long term return than the interest avoided by overpaying. However some people sleep better knowing they have less liabilities and sensitivity to future interest rate rises.
    Last edited by Alexland; 04-01-2018 at 10:44 PM.
    • DrEskimo
    • By DrEskimo 4th Jan 18, 11:32 PM
    • 81 Posts
    • 60 Thanks
    DrEskimo
    • #3
    • 4th Jan 18, 11:32 PM
    • #3
    • 4th Jan 18, 11:32 PM
    That's great, thanks for taking the time to respond.

    We don't give advice but pointers for your consideration.

    On the emergency fund look at using your personal savings allowance to hold the money in 5% FlexDirect and cycling through 5% regular saving accounts.
    Originally posted by Alexland
    I have indeed. I will look at the terms and conditions and see what is involved. The added interest is certainly welcome, but I do have to balance this with the additional work involved with switching accounts etc. While two jobs is nice from an income perspective, it doesn't leave much free time...!

    Given your fund choice you will be paying at least 0.25% with an alternative platform so it's up to you if you can be bothered moving for a 0.20% saving. Also bear in mind HL might charge an exit fee too...
    Originally posted by Alexland
    Yea just had a look at it seems to be about 25 + VAT. I need to think about my fund strategy. I don't think I would change if keeping the funds I have stated, but....

    Your choice but there isn't a VLS70 but you could split your investment 50:50 between VLS60 and VLS80 and rebalance periodically. If you did this you could go to the lower cost Vanguard Investor platform at 0.15% for a total cost of 0.37%
    Originally posted by Alexland
    This is a very intriguing proposition and I probably would look at transferring if I chose this strategy. Again, time is the only aspect that needs consideration.

    Also if you don't need access to 60 consider a S&S LISA for a 25% government bonus on up to 4k per year but the platform choice is limited so the fees slightly higher.
    Originally posted by Alexland
    Thanks I will look into this. I suspect I will access the money before 60 though.

    Yes healthy but you could still contribute a lot more into your pension to avoid higher rate tax and child benefit clawback (if applicable). Have you seen how much money you need to accumulate and grow above inflation for a comfortable early retirement?? I tune my income to keep within basic rate tax. This year my pension contribution is worth about 5x the value of my car.
    Originally posted by Alexland
    No I haven't. I must confess I haven't thought much about my pension at all. I contributed a small amount between ages 20 and 25, but then stopped when I did my PhD. I worked in the private sector for 10months and didn't pay anything into a pension (the work place pension was brought in when I resigned), so really it's only in the last 6months since working with my current employer (academic) that I am contributing anything meaningful unfortunately. I think all my additional income will be at the 40% rate. In principal I fully understand the logic, but not sure I want to contribute all of it! I will research how much I would want at retirement and go from there I think.

    Overpaying the mortgage might be worthwhile if it improves your LTV and resulting interest rate but once you own about 40% of the property the money is usually better invested for a greater long term return than the interest avoided by overpaying. However some people sleep better knowing they have less liabilities and sensitivity to future interest rate rises.
    Originally posted by Alexland
    Part of my mortgage is due renewal next month, but think its about 2.4%. The LTV is around 70% based on the purchase price, but I hope the value has increased substantially given the amount of work we carried out. I would estimate we are around the 55% mark now, but not had a formal valuation. I'm not too fussed about paying it all off. Both me and my partner are in well paid jobs and have done very well in terms of house value increase, so it's a sound investment from my perspective. We are likely to move in the next 3-5years as we continue to climb the property ladder. But thank you for the suggestion about 40% being the 'cut-point', very useful to consider.

    Thanks again!
    • ValiantSon
    • By ValiantSon 5th Jan 18, 12:14 AM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    • #4
    • 5th Jan 18, 12:14 AM
    • #4
    • 5th Jan 18, 12:14 AM
    The first thing was to build a small emergency fund. Both me and my partner have in excess of 10k now, which we have saved since July, so think we have that sorted. Both are kept in cash ISA accounts at about 0.5% interest, but obviously earning interest is not the aim of these accounts. I think 10k is probably too much, so after paying for the garden work, we will probably look to have about 6k in total.
    Originally posted by DrEskimo
    Your ISA rate is rubbish, as you rightly recognise. There is no real advantage in cash ISAs for basic rate tax payers unless they have very significant cash savings and do not wish to transfer those into investments.

    I agree with Alex that moving your emergency fund into better paying current accounts and regular savers is a good way forwards. Nationwide FlexDirect will pay you 5% on 2500 for one year, so I would split the fund across that and another one or two accounts, e.g. Tesco (paying 3% on 3000 - although you do need two direct debits to operate that account) and TSB Classic Plus (paying 3% on 1500).

    You'd have access to Nationwide's regular saver allowing 250 p/m at 5%. I'd suggest a First Direct or HSBC current account also to give acess to their regular savers too - First Direct gives 5% on 300 p/m and HSBC 5% on 250 p/m. (Neither of those accounts require direct debits - HSBC needs 2 standing orders, which you could use to help shift the money around between the different accounts). If you were able to switch an account to HSBC you would also get 150 swithching bonus (+50 in 12 months), or switching an account to Frist Direct would get you 125 switching bonus. Obviously both acounts need to be funded each month, bu the money doesn't have to remain in them so you can move it around (First Direct = 1000 p/m and HSBC = 1750 p/m).

    So I have about 900 each month from my full time work that is not going towards bills and living costs. I plan to put this into a S&S ISA that I set up with H&L a couple of months back.
    I realise now that H&L is one of the most expensive platforms, so my first question is whether it is worth moving to another platform before I build any substantial funds in my account?
    Originally posted by DrEskimo
    Factor in exit fees from Hargreaves Lansdown. They charge 30 plus 25 for each fund. Depending on how many funds you currently hold then it may total quite a lot. Would you save this with another platform? (If you already hold the funds you list then your exit charges would come to 130). Although you might want to think beyond just the one year saving/cost.

    However, see comments below....

    If this is true, is my strategy above sensible, or would I just be better off investing in the Vanguard 80%, or indeed lower at Vanguard 70%? I guess that's a question for myself and the amount of risk I am willing to take.
    Originally posted by DrEskimo
    If you did decide to consolidate those funds into just Vanguard LifeStrategy then you could sell the existing funds on Hargreaves Lansdown and purchase the Vanguard fund(s) there too - with no trading costs on funds - (thus keeping everything inside the ISA wrapper) and then transfer to Vanguard's ISA for a much lower fee.

    If you went for just VLS60 or VLS80 then you would pay 0.37% p.a. If you mixed VLS60 with VLS80 then you'd pay two fund OCFs, so your annual fees would be 0.49%, i.e. 100th of a percent more than Hargreaves Lansdown charge for just the platform fee. At some point your investment will get to a point where Vanguard are no longer the cheapest provider, so keep an eye on that and re-evaluate the costs. N.B. Vanguard charge no exit fees.

    If you went for a regular monthly payment into your ISA then, of course, Vanguard charge nothing for this. They also allow you to set a direct debit up to make those payments and you can allocate them straight away to purchasing new units in your funds. They also allow you to pay your account fees by direct debit, so there is no loss in investments.

    Alex has mentioned the advantage of a LISA, but that the available S&S LISAs are very limited. Oddly, the best option seems to me to be with Hargreaves Lansdown. I've posted in another thread on this today, but can't find it now . In it I've tried to give some cost comparisons for the different providers. You might want to have a look. (If it find it again I'll post the link.

    I am 30 and have no real plans for the money (not sure if this is unwise too...), but will be looking at keeping this invested for easily 10years+. If not longer. I think I am happy with a risk of about 80 at this stage.
    Originally posted by DrEskimo
    Certainly doesn't sound silly. You do need to look at this as a long term thing and 10 years is probably a minimum. At 30 you have probaby got another three decades before retirement, so you shouldn't need to touch it for some time. You seem to be in a good financial position.

    I also have additional funds coming in from a self-employed work (consultancy), so could look at increasing the amount I invest each month further. Although I am looking at additional contributions to my pension and overpaying the mortgage with that money. The additional income pushes me into the higher tax bracket, so additional pension contribution seems sensible, although I already contribute 8% and my employer contributes 16%, so is quite healthy I think?
    Originally posted by DrEskimo
    I'd look to keep your income below the higher rate threshold, assuming you aren't pushing significantly over it, and it sounds like you aren't. If you are well into the higher rate bracket then you should probably maximise pension contributions, but accept the tax for what it is and enjoy the benefits of your income!

    8% isn't bad, but there are plenty of us paying double or more, so if you could put more in, which it sounds like you could, then I'd suggest doing so. And the tax relief is an additional incentive!

    As to the mortgage, overpayments are probably a good idea, assuming you don't incur fees - double check what you are allowed to pay. Obviously it will save you interest, but in reducing your LTV you also increase the potential for better deals on remortgaging and, paying it off faster will give you more disposable income sooner to plough into investments and/or pension.
    Last edited by ValiantSon; 05-01-2018 at 12:19 AM.
    • Alexland
    • By Alexland 5th Jan 18, 12:25 AM
    • 2,574 Posts
    • 1,956 Thanks
    Alexland
    • #5
    • 5th Jan 18, 12:25 AM
    • #5
    • 5th Jan 18, 12:25 AM
    No I haven't. I must confess I haven't thought much about my pension at all. I contributed a small amount between ages 20 and 25, but then stopped when I did my PhD. I worked in the private sector for 10months and didn't pay anything into a pension (the work place pension was brought in when I resigned), so really it's only in the last 6months since working with my current employer (academic) that I am contributing anything meaningful unfortunately. I think all my additional income will be at the 40% rate. In principal I fully understand the logic, but not sure I want to contribute all of it! I will research how much I would want at retirement and go from there I think.
    Originally posted by DrEskimo
    Yup although ISAs are fun it sounds like your attention may be best spent thinking more about your pension position. If you haven't contributed much in your 20s then you are likely to have some catching up to do.

    There are many pension planning tools online which generate impressive looking forecasts but remember to consider if they are projecting returns above both inflation and fees. And if those are realistic returns for your asset allocation and our position within the economic cycle. Suggest you learn more about each of your plans and consolidate the smaller ones if appropriate.

    You may read articles about the 4% drawdown rule (so you could get an income of 4k per year for every 100k invested) but some of us think it is more prudent to plan for 1/30th or even 1/35th if retiring early. Also if you wish to retire early there is the 10 year gap before the state pension begins in which you are likely to be drawing down an extra 8.5k per year so that's another 85k each (in today's money) that needs to be accumulated.

    It is worth considering your partner's pension provision and in addition to regular expenditure don't forget to plan any capital expenditure in retirement (such as new cars, kitchens, bathrooms, carpets, driveways, etc). Over such a long time period stuff will break and wear out.

    Alex
    Last edited by Alexland; 05-01-2018 at 12:55 AM.
    • Alexland
    • By Alexland 5th Jan 18, 12:47 AM
    • 2,574 Posts
    • 1,956 Thanks
    Alexland
    • #6
    • 5th Jan 18, 12:47 AM
    • #6
    • 5th Jan 18, 12:47 AM
    If you went for just VLS60 or VLS80 then you would pay 0.37% p.a. If you mixed VLS60 with VLS80 then you'd pay two fund OCFs, so your annual fees would be 0.49%
    Originally posted by ValiantSon
    No because each fund fee would only be on half the money:

    5k in VLS60 0.22% would be 11 fund fee
    5k in VLS80 0.22% would be 11 fund fee
    10k platform 0.15% would be 15 fee
    Total cost = 11 + 11 + 15 = 37

    Alex has mentioned the advantage of a LISA, but that the available S&S LISAs are very limited. Oddly, the best option seems to me to be with Hargreaves Lansdown.
    Originally posted by ValiantSon
    I reckon Nutmeg are cheaper for early years at 0.62% (compared to HL+VLS at 0.67%) and AJ Bell are cheaper for later years if investing in ETF/ITs when platform fees are capped. AJ Bell could be cheaper for early years if investing lump sums and waiting for bonus to be added in funds to minimise the 1.50 trade fee.

    HL are close in all LISA scenarios but there is also a point you need to move from funds to ETF/ITs. As my LISA grows I will probably move from Nutmeg to HL as I have a pension linked to AJ Bell and I like to spread my risk across multiple platforms.

    Alex.
    Last edited by Alexland; 05-01-2018 at 1:11 AM. Reason: Changed 0.63% to 0.62%
    • ValiantSon
    • By ValiantSon 5th Jan 18, 12:58 AM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    • #7
    • 5th Jan 18, 12:58 AM
    • #7
    • 5th Jan 18, 12:58 AM
    No because each fund fee would only be on half the money:

    5k in VLS60 0.22% would be 11 fund fee
    5k in VLS80 0.22% would be 11 fund fee
    10k platform 0.15% would be 15 fee
    Total cost = 11 + 11 + 15 = 37
    Originally posted by Alexland
    Yeah, good point!

    Didn't think that one through did I?

    I reckon Nutmeg are cheaper for early years at 0.63% (compared to HL+VLS at 0.67%) and AJ Bell are cheaper for later years if investing in ETFs when platform fees are capped. AJ Bell could be cheaper for early years if investing lump sums.

    HL are close in all LISA scenarios. As my LISA grows I will probably move from Nutmeg to HL as I have a pension linked to AJ Bell and I like to spread my risk across multiple platforms.

    Alex.
    Originally posted by Alexland
    I make it 0.72% for Nutmeg on their Fixed Allocation Portfolio (0.45% platform + 0.17% fund + 0.1% market spread) and 1.04% on their Fully Managed Portfolio (0.75% platform + 0.19% fund + 0.1% market spread).

    Agree about AJ Bell if investing ETFs, but not if funds.
    • ValiantSon
    • By ValiantSon 5th Jan 18, 1:05 AM
    • 2,013 Posts
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    ValiantSon
    • #8
    • 5th Jan 18, 1:05 AM
    • #8
    • 5th Jan 18, 1:05 AM
    Here's the link to the other thread I mentioned.

    http://forums.moneysavingexpert.com/showthread.php?t=5767660
    • Alexland
    • By Alexland 5th Jan 18, 1:09 AM
    • 2,574 Posts
    • 1,956 Thanks
    Alexland
    • #9
    • 5th Jan 18, 1:09 AM
    • #9
    • 5th Jan 18, 1:09 AM
    I make it 0.72% for Nutmeg on their Fixed Allocation Portfolio (0.45% platform + 0.17% fund + 0.1% market spread) and 1.04% on their Fully Managed Portfolio (0.75% platform + 0.19% fund + 0.1% market spread).

    Agree about AJ Bell if investing ETFs, but not if funds.
    Originally posted by ValiantSon
    The market spread is a transactional cost of buying and selling ETFs not an ongoing cost (well slightly if you consider the reinvestment of Nutmeg ETF dividends). Vanguard also have similar transactional costs when buying or selling fund units but with funds it gets a bit complex.

    I corrected my Nutmeg cost from 0.63% to 0.62% sorry I was working from memory - forgive me 0.01%

    Both AJ Bell and HL are uncapped for LISA funds.
    Last edited by Alexland; 05-01-2018 at 1:21 AM.
    • ValiantSon
    • By ValiantSon 5th Jan 18, 1:43 AM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    The market spread is a transactional cost of buying and selling ETFs not an ongoing cost (well slightly if you consider the reinvestment of Nutmeg ETF dividends). Vanguard also have similar transactional costs when buying or selling fund units but with funds it gets a bit complex.

    I corrected my Nutmeg cost from 0.63% to 0.62% sorry I was working from memory - forgive me 0.01%

    Both AJ Bell and HL are uncapped for LISA funds.
    Originally posted by Alexland
    Yeah, appreciate complexity with funds. The way I read Nutmeg's fees they were rounding out the spread costs and transferring them to an individual investor as a p.a. charge of 0.1%. If this isn't the case then I apologise.

    Wasn't correcting you over the 0.01%.
    • AlanP
    • By AlanP 5th Jan 18, 10:31 AM
    • 1,205 Posts
    • 866 Thanks
    AlanP
    Whilst you may not want to tie money up in a LISA at present, as you "may" need it before Age 60 I would suggest that you open one each whilst you are still eligible (under 40) as you may want to use it in a few years time.
    • DrEskimo
    • By DrEskimo 5th Jan 18, 6:55 PM
    • 81 Posts
    • 60 Thanks
    DrEskimo
    Your ISA rate is rubbish, as you rightly recognise. There is no real advantage in cash ISAs for basic rate tax payers unless they have very significant cash savings and do not wish to transfer those into investments.

    I agree with Alex that moving your emergency fund into better paying current accounts and regular savers is a good way forwards. Nationwide FlexDirect will pay you 5% on 2500 for one year, so I would split the fund across that and another one or two accounts, e.g. Tesco (paying 3% on 3000 - although you do need two direct debits to operate that account) and TSB Classic Plus (paying 3% on 1500).

    You'd have access to Nationwide's regular saver allowing 250 p/m at 5%. I'd suggest a First Direct or HSBC current account also to give acess to their regular savers too - First Direct gives 5% on 300 p/m and HSBC 5% on 250 p/m. (Neither of those accounts require direct debits - HSBC needs 2 standing orders, which you could use to help shift the money around between the different accounts). If you were able to switch an account to HSBC you would also get 150 swithching bonus (+50 in 12 months), or switching an account to Frist Direct would get you 125 switching bonus. Obviously both acounts need to be funded each month, bu the money doesn't have to remain in them so you can move it around (First Direct = 1000 p/m and HSBC = 1750 p/m).



    Factor in exit fees from Hargreaves Lansdown. They charge 30 plus 25 for each fund. Depending on how many funds you currently hold then it may total quite a lot. Would you save this with another platform? (If you already hold the funds you list then your exit charges would come to 130). Although you might want to think beyond just the one year saving/cost.

    However, see comments below....



    If you did decide to consolidate those funds into just Vanguard LifeStrategy then you could sell the existing funds on Hargreaves Lansdown and purchase the Vanguard fund(s) there too - with no trading costs on funds - (thus keeping everything inside the ISA wrapper) and then transfer to Vanguard's ISA for a much lower fee.

    If you went for just VLS60 or VLS80 then you would pay 0.37% p.a. If you mixed VLS60 with VLS80 then you'd pay two fund OCFs, so your annual fees would be 0.49%, i.e. 100th of a percent more than Hargreaves Lansdown charge for just the platform fee. At some point your investment will get to a point where Vanguard are no longer the cheapest provider, so keep an eye on that and re-evaluate the costs. N.B. Vanguard charge no exit fees.

    If you went for a regular monthly payment into your ISA then, of course, Vanguard charge nothing for this. They also allow you to set a direct debit up to make those payments and you can allocate them straight away to purchasing new units in your funds. They also allow you to pay your account fees by direct debit, so there is no loss in investments.

    Alex has mentioned the advantage of a LISA, but that the available S&S LISAs are very limited. Oddly, the best option seems to me to be with Hargreaves Lansdown. I've posted in another thread on this today, but can't find it now . In it I've tried to give some cost comparisons for the different providers. You might want to have a look. (If it find it again I'll post the link.



    Certainly doesn't sound silly. You do need to look at this as a long term thing and 10 years is probably a minimum. At 30 you have probaby got another three decades before retirement, so you shouldn't need to touch it for some time. You seem to be in a good financial position.



    I'd look to keep your income below the higher rate threshold, assuming you aren't pushing significantly over it, and it sounds like you aren't. If you are well into the higher rate bracket then you should probably maximise pension contributions, but accept the tax for what it is and enjoy the benefits of your income!

    8% isn't bad, but there are plenty of us paying double or more, so if you could put more in, which it sounds like you could, then I'd suggest doing so. And the tax relief is an additional incentive!

    As to the mortgage, overpayments are probably a good idea, assuming you don't incur fees - double check what you are allowed to pay. Obviously it will save you interest, but in reducing your LTV you also increase the potential for better deals on remortgaging and, paying it off faster will give you more disposable income sooner to plough into investments and/or pension.
    Originally posted by ValiantSon
    Cheers Valiant, much appreciated.

    I will have a look into those savings accounts and start looking at the T&Cs to see how it would work. Never one to turn down free money....

    I think I quite like the investment strategy I have come up, in terms of VG 60% and three index trackers, and while I may save a bit of money by transferring to another platform, I think the costs and additional time is putting me off. I will look into more detail before ultimately deciding, but so far I have 150 invested in just the HSBC FTSE 250, and a direct debit that is set to make it's first debit next week. So it would not be hugely costly to move, but more time and setting up.

    Of course as my investments grow, I could begin to regret this decision...!

    I guess it depends on your definition of 'significant', but over half of my self-employment earnings will fall in the higher tax bracket I think. I've only done it for 5months, and on average I have earned about an extra 2k a month. Hard to know if this will continue for the remaining 7months though. I have stuck 50% aside in a regular savings account in preparation for my self-assessment tax, as I'm not 100% sure exactly how much I will owe. 5k is earning 1.5%, but the next 5k will only earn 1%, so I am tempted to move any more into my NS&I premium bond account, on the hope that I will get the average 1.4%. Obviously this isn't really 'my money', so not too fussed where it goes as long as it's zero risk.
    I have used an online calculator (sorry cant post link), but not fully confident in it. Mainly due to how it calculates the additional student loan contributions. I am on a plan 1 student loan and was told by the loan company that both my employment salary and self-employment salary will be treated separately. So I only pay 9% on anything above 17,775 on my employment salary, and only pay 9% on anything above 17,775 on my self-employment salary. I thought this was rather generous, as I initially thought it would just be combined and I'll pay 9% on everything I earn from self-employment. Indeed this is what the online calculator assumes too....if anyone knows for certain that would be great!

    While my contribution based on my standard salary is 8%, if I look at it in terms of my total annual (predicted) income, it is only 5%. So I am thinking of adding the same amount again as an additional contribution into my pension, which will increase my coverall contribution to 10%. I will do some more research, but upon first glance I think my pension provider will do further matching on additional contributions, so this, coupled with my higher tax rate, suggests to me that pensions would be better that LISA? Then anything remaining can go to mortgage over-repayments and beefing up my 'enjoyment' budget.

    And yes I checked with my mortgage provider, and I wont be anywhere near the 10% per year mark to worry about fees.
    • ValiantSon
    • By ValiantSon 5th Jan 18, 7:32 PM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    Cheers Valiant, much appreciated.

    I will have a look into those savings accounts and start looking at the T&Cs to see how it would work. Never one to turn down free money....
    Originally posted by DrEskimo
    Hope you find them useful suggestions. Just one slight correction - Tesco require three direct debits. Sorry for earlier mistake; keeping the requiremtns of all the different accounts in my head is liable to produce the occasional error.

    I think I quite like the investment strategy I have come up, in terms of VG 60% and three index trackers, and while I may save a bit of money by transferring to another platform, I think the costs and additional time is putting me off. I will look into more detail before ultimately deciding, but so far I have 150 invested in just the HSBC FTSE 250, and a direct debit that is set to make it's first debit next week. So it would not be hugely costly to move, but more time and setting up.

    Of course as my investments grow, I could begin to regret this decision...!
    Originally posted by DrEskimo
    If you are happy with your current plan then no need to change it. Perhaps in the medium term investigate different platform charging models as there are cheaper ways of doing it and every pound spent in fees is a pound lost in returns (and the subsequent compounding). Have a look at this comparison table for platforms http://monevator.com/compare-uk-cheapest-online-brokers/.

    With current sums invested it is probably percentage fee platforms that would suit you best. Cavendish Online might be a good option as they only charge 0.25% platform fee with no charges for dealing funds and no exit fees. Given Hargreaves Lansdown's exit fees you might actually save by selling your investments there, closing the account and then opening a new S&S ISA with Cavendish to re-purchase the funds. There is a slim chance that this would cost you in the change in price, but it probably won't and even if it did it would be a tiny fraction in comparison to Hargreaves Lansdown's fees.

    If it were me then I would make the changes as, although at the moment the amounts we are talking about are small, they won't remain so as your investments grow, and why pay more anyway?

    While my contribution based on my standard salary is 8%, if I look at it in terms of my total annual (predicted) income, it is only 5%. So I am thinking of adding the same amount again as an additional contribution into my pension, which will increase my coverall contribution to 10%. I will do some more research, but upon first glance I think my pension provider will do further matching on additional contributions, so this, coupled with my higher tax rate, suggests to me that pensions would be better that LISA? Then anything remaining can go to mortgage over-repayments and beefing up my 'enjoyment' budget.
    Originally posted by DrEskimo
    If it were me then I would definitely up the pension contributions. 5% is fairly low, 10% is better, and 15% is even better still . If your employer will match increased contributions then that is even better - they are in effect giving you a tax free pay rise! What a nice employer.

    Best wishes.
    Last edited by ValiantSon; 05-01-2018 at 7:34 PM.
    • DrEskimo
    • By DrEskimo 10th Jan 18, 7:24 PM
    • 81 Posts
    • 60 Thanks
    DrEskimo
    So after a bit of research thought I would update this...
    Turning more into a pensions related thread now, so possibly in the wrong area..!

    So both my previous employment and my current employment have pensions under the defined benefit scheme. I was in employment for a total of about 6yrs between 22 and 28, where I earned an average of 23k. Since I did a PhD in the final 3yrs I only worked 1day a week, so my FTE was about 4yrs, and my defined benefit from this is about 1,500 per annum.

    So basically, not a lot...!

    My current employer is also providing a pension on a similar defined benefit scheme. 1/75 of my salary as an annual payment and 3/75 as a lump sum. Obviously I have no idea what my average earnings will be over the next 35years, or if I will even stay with my current employer for so long (academic, so unlikely..), but I am in a fairly junior position and would hope for a few promotions along the way, so it looks like getting an annual defined benefit of 25k is realistic, assuming I stay of course.

    Any additional contributions will go to a separate investment builder. My employer will only match 1%, so I will get an extra 1% on top of the 8%. If I contribute an additional 8% (256) towards this, and assume an average return of 5% in the investment (and 2.5% inflation), it will be an extra 200k in a lump sum.

    So question is...do I contribute the extra to the investment builder and enjoy the tax relief, or do I just keep the additional income and enjoy it/invest it in my S&S ISA? I guess the 40% tax relief on AVC given my self-employment makes the pension investment the most economical sound decision....

    Anything else I'm missing....?
    • Alexland
    • By Alexland 11th Jan 18, 9:37 PM
    • 2,574 Posts
    • 1,956 Thanks
    Alexland
    I don't understand how you might change employers and are still likely to build up a decent DB entitlement. Getting access to a DB is increasing unlikely in the future as employers close them to both new and existing members. I wouldn't base your retirement planning on having access to a DB scheme for the next 35 years!!

    From what I understand of your position I would definitely contribute enough to the DC scheme to both get employer matching and avoid 40% tax to catch up with the missed years.

    Alex
    Last edited by Alexland; 11-01-2018 at 9:39 PM.
    • DrEskimo
    • By DrEskimo 12th Jan 18, 12:16 AM
    • 81 Posts
    • 60 Thanks
    DrEskimo
    I don't understand how you might change employers and are still likely to build up a decent DB entitlement. Getting access to a DB is increasing unlikely in the future as employers close them to both new and existing members. I wouldn't base your retirement planning on having access to a DB scheme for the next 35 years!!

    From what I understand of your position I would definitely contribute enough to the DC scheme to both get employer matching and avoid 40% tax to catch up with the missed years.

    Alex
    Originally posted by Alexland
    Yes very good point!

    I suspect you are right. Take advantage of 1% match and the tax relief.

    I'm finding it difficult to work out how to plan appropriately when my long-term employment plans are quite uncertain. Might stay at this uni for many years, might move back to industry, or might go full set-employment...!

    Not to mention working out what my immediate costs might be, such as moving home, buying a car again or getting married...

    If my income is the same level as the last 5months, I have enough to do mortgage overpayments, ISA S&S investments, AVC to the pension and cash savings for immediate purchases. To be fair there is little reason to think it wont stay the same (might go up if anything..), but I may need to re-structure my contributions to each to get it more in sync with my plans.
    • DrEskimo
    • By DrEskimo 20th Feb 18, 11:17 AM
    • 81 Posts
    • 60 Thanks
    DrEskimo
    So a small update...

    I now have 1,000 in my HL ISA, split across 4 funds. One of which is the VLS 60% (55%). The other 3 are tracking funds (15% each).

    I think my reasons for this was that I thought having just one fund in the form of a VLS was not diversified enough, afraid just one fund was too simplistic! However, doing more research on here (I'm still about, quietly reading and absorbing information!) and elsewhere, I think it was naive of me to try and expand the allocation of the VLS through my own very inexperienced choices...! After all, the allocation of the VLS has been carefully considered by people far more knowledgeable than me....

    So I have been thinking about selling the three funds at their current rate, and using that to buy shares in HSBC Global Strategy Dynamic. This would essentially be like having just the VLS 60 and VLS 80 to get a VLS 70 ( I am happy with lowering my risk profile slightly, and may adjust the proportions to give me closer to 75), however from what I've read the HSBC could provide a bit more balance compared to two VLS based global funds due to their choice of bonds and lower weighting to the UK market.

    Obviously my choice of funds it my decision to make, but just wondering if I am missing something obvious about selling funds so soon after, and using them to reallocate into a single fund? Obviously the recent dip has meant they are worth a little less than what I bought them for, but my logic is that the HSBC Global fund will be worth less too, so shouldn't have a huge effect overall? I think the HSBC global dynamic has faired a bit better than my 3 chosen funds over the last month, so I think I am a tiny bit worse off when I compare the prices between now and last month, but I don't think it will amount to much over the long run? Unless of course there are other charges/fees I am missing...? Obviously the simplicity I think will be worth it.

    With regards to everything else, I am overpaying on my mortgage just to achieve the shorter term I want, and I have calculated my tax based on my PAYE and self-employment, and have about 7k in savings now. I have opened a Nationwide account to start moving most of that to the 5% current account and savings account.

    I will likely be adding additional contributions to my mortgage, even just 1% to get the 1% match to the DC part of my USS pension, but I am seeing how my self-employment work pans out this year before I make any decisions.
    • ColdIron
    • By ColdIron 20th Feb 18, 11:26 AM
    • 4,260 Posts
    • 5,393 Thanks
    ColdIron
    With only 1,000 in play just choose one fund and forget about it, it won't make any useful difference at this level
    • DrEskimo
    • By DrEskimo 20th Feb 18, 11:29 AM
    • 81 Posts
    • 60 Thanks
    DrEskimo
    With only 1,000 in play just choose one fund and forget about it, it won't make any useful difference at this level
    Originally posted by ColdIron
    I think the term 'overthinking' is probably appropriate here....

    Obviously I am adding to this on a monthly basis, and that amount will depend on disposable income, but should be around the 500 mark.
    • dunstonh
    • By dunstonh 20th Feb 18, 11:43 AM
    • 93,022 Posts
    • 60,407 Thanks
    dunstonh
    I now have 1,000 in my HL ISA, split across 4 funds. One of which is the VLS 60% (55%). The other 3 are tracking funds (15% each).
    Over complicated and totally pointless for 1000.

    Lets say your random selection gives you a whole 1% better return over the next 5 years compared to just the VLS. That is 10. You are just as likely to end up 10 worse off too.

    Stick with a single multi-asset fund and stop faffing about.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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